How to beware of mortgage wire fraud during closing

When you get a home loan, there’s likely a lot on your mind. And who can blame you? If you’re buying a house, you have to think about getting funds ready and complying with lender and title company requests while also scheduling movers and thinking about address changes. Even in refinancing, it’s still one of the biggest financial transactions you can make.

You commonly wire your down payment and closing costs. But a wire transfer isn’t something most people do regularly. When you combine this with the controlled chaos of a mortgage transaction, it’s fertile territory for mortgage scammers. Criminals will target unsuspecting clients in bank wire transfer scams, often using fake emails. Millions of dollars are lost in wire fraud schemes. We’ll give you the tools and info to protect yourself.

While these are general safety tips, we encourage you to consult an attorney if you need personalized legal advice.

What is wire fraud in real estate?

Mortgage wire fraud involves someone posing as an individual involved in your closing process for the purpose of getting you to wire funds to the criminal rather than the intended recipient. They could be impersonating your real estate agent, someone at the mortgage company, or the settlement agent in charge of your closing.

According to the FBI’s Internet Crime Complaint Center, in 2023, Americans recorded just over $758 million in losses, and that’s just the crimes that were reported for attempted recovery. The good news is, a little over $538 million was frozen before the perpetrators could get away with the funds, but it’s still a major problem worth taking precautions over.

With varying sophistication, the typical scam involves two stages: spoofing and phishing. Spoofing involves creating emails that look like they come from someone else or even making it look like a call is coming from a trusted phone number when it’s really coming from the scammer. The spoofing sets up the second stage, earning your trust so the criminal can “phish” for personal details and eventually get you to send funds.

How does wire fraud work?

There are several ways fraudsters perpetrate their schemes. We’ll look at a scenario that’s complicated before getting into something on the simpler side:

Someone with experience doing nefarious hacking of computer systems might target a real estate agent, title services professional, or a representative of your lender with a well-crafted email that gets them to click a link to a webpage that downloads a virus to the computer. Once this is running in the background, a hacker can see all the details and upcoming appointments that person has, allowing for convincing impersonation.

The more deceptively simple version of this is a caution to all home buyers to be careful what you share publicly. It could be something as simple as saying “I’m so excited to close on my first home next week. Thanks so much to Jane Doe at Best Agent Realty for your unwavering guidance and support.” Now they know the timeline for your closing, your agent and where they work.

Once they have the necessary impersonation information, they’ll create a realistic looking email or phone script saying they need information from you. Here are some things they might try:

• Similar email addresses: JohnDoe@rocketm0rtgage.com
• Links that go elsewhere: Be aware that the hypertext of a link may not match its destination. You can hover over the link (without clicking) and check the address it’s taking you to.
• Check email metadata: There are ways to check the header of an email to make sure it’s actually coming from where it says it’s coming from.
• Check website certificates: If you’ve clicked a link in an email, you can check the certificate of the website and see who owns the registration to make sure it matches your expectation. Typically, there’s a button just to the left of the URL in the address bar. One of the options that comes up will allow you to check certificate details. Some even include the mailing address of the company so you can crosscheck.
• Don’t get fooled by the details: Closing costs are typically 3% – 6% of the loan amount or purchase price. That’s something easily verified on the internet. Knowing this, a criminal can use that information to make the amount they request sound right. Just because it sounds right doesn’t mean it is.

If you have concerns, make a direct call to your contact to ask if they reached out to you. Beyond the technical level, here are some red flags that indicate the communication may require an extra level of scrutiny:

• Unusual requests: Be cautious if you receive sudden changes in payment instructions that differ from the initial mortgage closing process.
• Urgency and pressure: Scammers often create a sense of urgency, pushing you to act quickly and avoid questioning unusual circumstances.
• Unprofessional communication: Look for signs like poor grammar, typos, or a shift in tone from your usual communication with real estate agents or loan officers.
• Inconsistent information: Pay attention to discrepancies between emails or communications, which could signal a scam.

How can I identify wire fraud?

Now that you have a high-level overview, let’s go over specific steps you can take to protect yourself from wire fraud.

Know your closing process

Have a conversation well in advance of your scheduled settlement date to understand the closing process. The closing agent should walk you through exactly what to expect so you’ll know if anything deviates from that process. You can also speak with the lender in advance to see what kind of payment methods they take.

Write down contact information

Be sure you have contact information for parties attending your closing. At minimum, you want name and phone number(s). This allows you to contact them in case you have questions about instructions you’re receiving. Give someone a call if something doesn’t smell right. The Consumer Financial Protection Bureau has a closing checklist that would be helpful. Just don’t share the details with others.

Be suspicious of last-minute closing changes

If you get details regarding a last-minute change, that’s something to be suspicious of automatically. Everyone has heard horror stories of deals falling through at the last second. Scammers use your anxiety over the process to hope that you won’t confirm the details they’re sending with a trusted party. No one is going to cancel a deal because you didn’t wire the funds in their desired 10-minute window. Take time to confirm.

Call trusted contacts to confirm wiring instructions

Trusted contacts like the settlement agent from the title company or your real estate agent should call you or discuss wire transfer information in person. Don’t believe everything you read in an email – they can be easily spoofed.

Never email your financial information

It’s possible to encrypt email, but the system doesn’t do this by default. It’s also not easy to set this up. For this reason, assume your lender won’t send you important information in an email. You shouldn’t either. If information is necessary from you, your lender will give you access to a secure portal. Check the link before clicking to verify the destination.

Be cautious of phone calls

Phone conversations are better than email because at least you have someone’s voice, but you can spoof numbers and AI voices are getting pretty good. Someone may call you saying they have important info, but they want to first confirm your identity. If something doesn’t feel right, feel free to call your trusted contact yourself at a number that you know. Once you’ve made the call, they can verify instructions and any changes.

Action to take if you believe you’ve been scammed

Take a deep breath and follow these steps if you think you’re the victim of mortgage wire fraud.

Contact your bank or wire transfer company immediately

Contact your bank or wire service if you believe you sent money to an illegitimate party. While you may not be refunded if the transfer has already been completed, you may be able to cancel the transfer before it goes through if you act fast. You should also reach out to the title company, lender, your real estate agent, and other parties to your closing to see if they have any steps you should take.

File a complaint with the FBI

We mentioned the FBI’s internet crime division above. If you’re a wire fraud victim, you can file a report with them. They have a team that works to recover funds from fraudsters. You should also fill out a police report. This can be shared with the closing agent, the lender, and your real estate agent. The report might also be handy if you have to file any disputes on your credit due to identity theft rising from this incident.

The Bottom Line: Protect your money from scams

Getting a mortgage can be a stressful and complex process. Because of this, clients can be a big target for scammers who use spoofing and phishing techniques to trick you into sending money to their account that was meant for the title company. You can protect yourself by verifying information for trusted contacts. If something seems off, you can always make a phone call and confirm the details.

Do you feel equipped with the information you need to protect yourself from unscrupulous scammers? If you’re ready, you can apply for a mortgage.